Economic "Study" Phase II does not make the case for new TLDs - ICANN and authors should be ashamed to present this "work" to the public

[George Kirikos <gkirikos@xxxxxxxxx>]

Hello,

I see that ICANN has posted Phase II of the "Economic Study" of new TLDs:

http://www.icann.org/en/announcements/announcement-03dec10-en.htm

It leaves much to be desired. First of all, ICANN once again obfuscates the 
fact that this was not some peer-reviewed high quality independent study. 
Rather, it is another paid report commissioned from Compass Lexecon, the same 
authors of the "Carlton" report which was widely mocked. I pointed this out at:

http://forum.icann.org/lists/economic-framework/msg00001.html
http://forum.icann.org/lists/economic-framework/msg00002.html

and the distinguished KC Claffy of CAIDA (a member of the ICANN Security 
And Stability Advisory Committee) even noted:

http://forum.icann.org/lists/economic-framework/msg00004.html

"Like the Carlton report, the authors still seem to think one way to "evaluate" 
concerns raised by others is to dismiss them without further study.  George 
Kirikos observed one reason for the similarity between the two reports -- there 
was overlap in authorship. Despite the loud complaints that the 
previous report was not sufficiently objective, ICANN commissioned a second 
report that was ultimately co-authored by the same company as the first report, 
a fact hidden by ICANN's emphasis on only the Stanford and Berkeley co-authors 
in the report's description on the ICANN web site."

As noted in the metadata of the new PDF that ICANN has just posted, the 
"author" 
was once again Teresa Sullivan of Compass Lexecon.

Even though it has been more than 4 months since the end of the Phase I paper 
comment period has concluded, ICANN has failed to provide a summary or analysis 
of the past comments:

http://forum.icann.org/lists/economic-framework/

Important comments, including KC Claffy's note that:

"...the ICANN-commissioned report, despite having academic authors, seems to 
eschew scholarship, by failing to cite related  work and how it compares to the 
authors' own results, and avoiding  discussion of (or discounting) empirical 
data that sheds doubt on  the wisdom of what ICANN has made clear it plans to 

do anyway."

"....ICANN's behavior looks like it's trying to buy rubberstamps of its 
current plans from commercial consultants, rather than foster what is needed in 
the long term: a coherent field of objective, peer-reviewed technical, policy, 
and economic research on Internet naming and numbering, and incentivized 
data-sharing to support such research."

I'll note once again, KC Claffy is on ICANN SSAC. Why is ICANN not summarizing 
and analyzing comments even from those who are considered "highly trusted" 
within the ICANN community to be in SSAC??!!??

Now, on to the latest "paper". Briefly, it is junk, and mere intellectual 
masturbation. It once again lacks any empirical rigour. It also ignores what 
the 
Department of Commerce letter of 2008 *told* ICANN to study:

http://www.ntia.doc.gov/comments/2008/ICANN_081218.pdf

Take a look at PAGE 1 of that PDF!! Where is the work about whether the domain 
registration market is one market or separate markets? Where is the work about 
substitutability? Where is the work about switching costs? And so on? Is ICANN 
trying to pull a fast one on the public, by not even instructing its paid 

consultants to do the right study?? Everyone should read the ENTIRE PDF from 
2008. It was very detailed. Everyone should read the original comments to the 
Carlton reports and to the Phase I report (not the staff summaries). There were 
detailed submissions, and once again ICANN and its paid consultants have failed 

to do the proper analysis. I posed very specific questions that would directly 
test "switching costs", even offering to directly purchase the ICANN.org domain 
name, in order to bring out ICANN's own "switching costs." ICANN ignored these 
tests, because they are simple and easy to replicate. If ICANN would refuse an 
offer of $10,000 for the ICANN.org domain name, clearly it's because their 
switching costs exceed $10,000. Ask the same question of Fortune 500 companies, 
or even a broad range of domain registrants, and one could quickly realize that 
actual switching costs for domain names are very high. The authors have failed 
to study why .com prices charged by VeriSign are substantially higher than the 
sub-$1.50/yr price tariff charged by SMS800.com for toll-free numbers. A 
scholarly study would have taken on those important questions about market 
structure and competition.


The authors have not even attempted to perform a true study of the AFTERMARKET 
for domain names. How can one call this a serious piece of work when there's no 
single reference to transactions like Fund.com for $10 million, Sex.com for $13 
million, or those for new TLDs, etc., to discuss switching costs, 
substitutability, etc. The flowers.mobi transaction at $200,000 was mentioned, 
from 2007, but the more recent re-auction for $6,500 was NOT mentioned,

http://www.webmasterworld.com/domain_names/4219021.htm
http://www.ricklatona.com/2010/09/10/rick-schwartz-to-auction-flowers-mobi-at-no-reserve-at-t-r-a-f-f-i-c-miami/


which would demonstrate the typical "hype-bust" cycle that the public suffers 
due to new TLDs. Many of the "showcase" sites linked to from mTLD's own sites 
are currently dead zombie sites. The authors did not even attempt to study 
.jobs, .travel or other new TLDs. All they did was preliminary partial survey 
work, brief "case studies" that an undergraduate might get a 'C' for, not real 
work that should determine outcomes of imporant policy questions in the real 
world.

They make only anecdotal references to a handful of transactions, rather than 
doing a *systematic* study of ALL reported transactions. That's the difference 
between a casual "survey" paper and real original research that is rigorous. 
The 
data *is* available (e.g. DNJournal.com and other sources have years worth of 
transactions). But, it appears the authors were rushing to slap together 
something, anything, that ICANN can "claim" is supportive of the new TLD 
process. Perhaps ICANN was counting on an assumption that a last minute 
publication would be "overlooked" or "ignored". That assumption is incorrect.

It's hard to believe that people are actually getting paid for this "work", 
but as stated above, it's merely an attempt to justify a pre-determined 
decision 
(like a study commissioned in support of litigation, to support a specific 
"Point of View"), rather than being true scholarly research. It's kabuki 
theater at best. The authors do not even "take on" the important comments by 
Tim 
Berners-Lee!

http://www.w3.org/DesignIssues/TLD
http://forum.icann.org/lists/competition-pricing-prelim/msg00016.html

Read the title "New Top Level Domains Considered Harmful" (note, .xxx and 
.mobi were *examples*, but the document applied to ALL new TLDs). How could it 
have been more direct? The document even went into the economics of the matter. 
What did ICANN do? It ignored these warnings, as it does again in the present! 
One  would think that ICANN would have learned its lesson. A rational 
and responsible organization would have learned from its mistakes. However, 
ICANN seeks to  repeat the mistakes of the past, and indeed to SURPASS and 
EXCEED those  mistakes. 



The number of matches for "Berner" in the latest "work" = ZERO! How can this be 
considered quality research when it failed to analyze past important documents? 
It mentioned the "Device Independence" document of the W3 in a footnote, but 
failed to refute the broader and more important work by the W3 above.


The "empirical" work, if you can call it that, is hilarious to read. These are 
supposed to be papers by EXPERTS, not newbies. Paragraph 17 (page 9) talks 
about 
a "non-random sample of five generic words." You *must* be kidding. Is that a 
statistically significant sample? Where did these authors study statistics?? I 
really want to know. Five words. Not even "random". This is basic "anecdotal" 
hand waving work, not anything experts would call "empirical" work. Empirical 
work means writing tools to download the entire zone file. Domain experts do 
this on a DAILY basis. Heck, for under $300 the authors could have bought a 
copy 
of the software at www.domainresearchtools.com !! Did they? Of course not -- 
yet, we'll see in ICANN's Form 990 that the public likely got billed hundreds 
of 
thousands of dollars again for this "work." ICANN, and the authors, should be 
ashamed at wasting the money of the public. They could have easily downloaded 
the entire universe of domain names (zone files are public, after all). They 
did 
not. They could have consulted with experts like myself who made comments, and 
were open to following up. They did not. They did not even reference the Phase 
I 
comments that were made. This is true garbage in terms of statistical work (I 
did Ph.D. studies in econometrics as part of my Economics graduate, although I 
did not complete a dissertation; I have published peer reviewed papers, as 
noted 
elsewhere (use Google Scholar to look me up)).. "Non-random" is another way of 
saying "biased" and "pre-selected", which actually *is* consistent with the 
nature of the work. This is not rigorous, valid and independent research.

Ultimately, the authors themselves come to the "conclusion" that net benefits 
are "uncertain". They speak of "potential." They completely lack empirical 
basis, and are simply engaging in "hand waving" that wouldn't be acceptable at 
a 
graduate school seminar (or even undergraduate, for that matter). That's not 
good enough to proceed with new TLDs. ICANN has failed to demonstrate it has 
met 
the high standards of the Affirmation of Commitments. What matters is the net 
benefit to the *public*, and this needs to *exclude* the benefit to registry 
operators themselves. You can't rob Peter to pay Paul, and call that 
"innovation."

The authors throw around buzz words like "principle of revealed preference" to 
attempt to pretend that there is deep underlying scholarly understanding behind 
their work. Ultimately, though, they failed to do the real work. They could 
have 
done proper statistical tests, the systematic study of the entire universe of 
domain names (zone files, hello??) broad surveys of real domain name 
participants/registrants, but instead did not do the proper work. They could 
have studied *actual* preferences, via real world data. They could call up 
Amazon.com, and ask them what it would cost for them to switch to a different 
domain name. Did they? Of course not.

Similar to the "benefits" section of the paper, the "costs" work was a joke. It 
was a series of anecdotes, without reference to rigorous real world data. Ask 
Verizon or Microsoft or any company why they own tens of thousands of domain 
names (99% of which are *defensive* registrations). Oh, I forgot, it was the 
*job* of these authors to ask them, but they didn't. Ooops. They could have 
bought a membership in DomainTools.com and used the Typo Generator to quickly 
see the extent of cybersquatting. Of course, instead of spending under $400, 
they instead relied on their "anecdotes", as if that is sufficient. The authors 
failed to reference the Tim Berners-Lee paper at all, which directly discussed 
the "costs" of new TLDs. It's not just TM owners who lose from new TLDs, the 
damage is far more widespread than that. Actual UDRP cases are insufficient to 
study the extent of costs. Actual sunrises are insufficient. There is "death by 
a thousand cuts", where there is too much small scale cybersquatting to pursue 
efficiently in the legal system. There are also court cases (available via 
PACER) that have not been discussed. e.g. Verizon vs. iREIT, the numerous cases 
by Microsoft, etc. The authors have not discussed the apparent cybersquatting 
activities of affiliates to large registrars such as GoDaddy and eNom that I 
discussed in previous comments. The authors have not discussed domain tasting, 
or how vertical integration would enable registries to misuse data to 
efficiently re-engage in those activities for themselves. 

In conclusion, it's check-mate, game over. ICANN needs to abandon this project 
once and for all. It has wasted millions of dollars of the public's money. It's 
time to move on to more important work, like DNSSEC, IPv6, increasing domain 
name security for registrants, and lowering costs to consumers through a tender 
process for operation of the .com registry. These should be ICANN's priorities. 
We look forward  to a sizable reduction in ICANN staff, and a scaling back of 
the organization in line with what DOC will agree should be the true priorities 
of the organization.

A proper study would have said "the benefits of new TLDs" would be $X billion, 
and the costs would be "$Y billion" and would allocate those costs to various 
parties (consumers, registrars, registries, etc.). The number of new TLDs would 
have been discussed (rather than "unlimited" or "1,000/year"). The lack of any 
financial numbers of this nature, or even an *attempt* to get to those numbers, 
tell us that the study was completely worthless. Actually, less than worthless, 
as the community probably spent hundreds of thousands of dollars for this 
"consulting work" by these non-experts.

I leave ICANN with two questions, as a direct test of "switching costs", 
something which was supposed to be studied, but was not. I am prepared to offer 
$10,000 for the ICANN.org domain name. Does ICANN accept this offer? (if it 
does 
not, then obviously the switching costs exceed $10,000). If $10,000 is not 
acceptable, name the price. Similarly, I offer $10,000 for the currently 
reserved domain name "Example.com". ICANN can accept my offer, and take all 
appropriate steps to unreserve it, and reserve an alternate domain name, 
rewriting the RFCs, etc. If the $10,000 offer is not accepted, please explain 
why, with direct reference to the size of those "switching costs."

Sincerely,

George Kirikos
President
Leap of Faith Financial Services Inc.
http://www.leap.com/